Elbit to help Japan building a modern Defense Industry

Above: Japanese soldiers during an exercise at a US Marine Corps Base. Credit: US DoD

Elbit Systems, Nippon Aircraft Supply and Itochu Aviation have signed a strategic cooperation Memorandum of Understanding (MOU) to promote mutual cooperation for the benefit of Japan’s defense efforts. As part of the MOU, Elbit Systems will provide the main components, technology and knowledge to NAS and Itochu. NAS will provide the capabilities for local integration, manufacturing, test and maintenance and Itochu will lead the marketing of the products in Japan. The cooperation marks an urgent need of the Japanese Self-Defense Forces.

Japan is now facing new threats from North Korea and China, but following many years of neglect, its defense forces and defense industry are small and lack modern capabilities. According to Carnegie Endowment for International Peace, over the past thirty years, Japan has maintained an annual defense budget of about 1% of its GDP. This is below the 2% NATO benchmark and even further from regional counterparts such as South Korea, India, and Taiwan. “Decades of low spending have left Japan’s defense force with aging physical infrastructure and low munitions stockpiles. Upgrading Japan’s defense sector will take years to complete, only yielding full benefits well-after 2027.”

Technology and knowhow transfer

The MOU with Elbit is aimed to address the growing Japanese interest in the field of defense. Osamu Matsushita, President of Nippon Aircraft Supply said the partners will contribute to Japan’s defense by providing high-quality made-in Japan products. “We will act in the role of integration, local production, testing and maintenance with the most advanced and combat-proven solutions developed by Elbit Systems.”

Ran Kril, Executive VP International Marketing & Business Development of Elbit Systems, said that Elbit is in close contact with its local partners and offers them innovative and cutting-edge technological solutions. “We remain committed to the transfer of technology as well as the manufacturing of our solutions in the local market.”

Japan has developed an appetite for Israeli Technologies

Above: Value of Deals Involving Japanese Investors

Israeli high-tech industry has became a major attraction for Japanese investors. Since 2010, Japanese investment deals in almost all types of Israeli high-tech companies have continued to grow, while the number of investment deals involving Japanese investors in the second half of the decade has nearly tripled compared to the first half. A new market research, Japanese Investments in Israeli High-Tech Companies, predicts that regardless the COVID-19 pandemic – 2020 is expected to be a record year in Japanese activity in Israel.

The newly released study was made by IVC-Online,  Meitar Law Offices and Magenta Venture Partners. The researchers estimate that based on information for the first half of 2020, “Japanese investors’ activity in Israeli hightech companies remained at least at the same level as in 2019, which was a peak year during which Israeli companies raised over $1.5 billion in investment deals involving Japanese investors.”

From 2017, there has been increasing diversity in the types of Japanese investors, including car manufacturers, financial institutions, insurance companies and VCs. Based on H1/2020 data, the upward trend in the number of Japanese investors appears to be continuing. In the years 2010–2019, there were 10 M&A deals and buyouts of Israeli companies by Japanese acquirers, with a total value of $2.34 billion.

The acquisition of NeuroDerm by Mitsubishi Tanabe in 2017 for approximately $1.1 billion, is the largest M&A deal in Israel by a Japanese entity. Recent Investments Led by Japanese Investors include the Hailo’s $60 million raising (led by NEC) in March 2020, Cybereason’s fifth round of $200 million (led by SoftBank) in August 2019, and Lemomade’s $300 million funad raising, also led by SoftBank, from April 2019.